Amid the current stock market rally, I’ve been looking for UK shares to buy. Here are three companies that have made it onto my watchlist for future purchases.
UK shares I’d buy
The UK construction sector is booming. And to play this theme, I’d buy Travis Perkins (LSE: TPK). One of the biggest suppliers to the building market, the company should benefit from the rising demand for materials.
Analysts expect earnings to increase rapidly over the next two years, reaching 108p per share in 2022, up from 93p in 2019. I think the company should be able to use this growth to reinvest in new facilities and products, which would ultimately increase its appeal to customers in the long run.
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The biggest challenge the group faces is the cyclical nature of the construction industry. The sector is expanding right now, but it could take a sudden turn for the worse. That would be bad news for Travis.
Still, considering its near-term potential, I’d buy the stock as part of a basket of UK shares today.
Income and growth
As one of the only publicly-traded hedge funds, I think Man (LSE: EMG) could be a great addition to a portfolio of UK shares.
The purpose of hedge funds is to make money in all markets. Man has a solid track record of doing so and producing attractive returns for its public investors along the way. Indeed, analysts believe the stock’s dividend yield will hit 4.8% in 2021, although this is just a forecast at this stage.
What’s more, based on current forecasts, the stock is currently dealing at a forward P/E of 12. That looks cheap to the market average of 16, in my view.
However, I do think the business deserves a slight discount to the broader market. Hedge fund profits can be highly volatile. So, while Man has a good track record of generating profits for investors, there’s no guarantee this will continue. It also uses a lot of borrowing. As such, just one bad year could result in considerable losses.
Due to the risks outlined above, this stock may not be suitable for all investors. But I’d buy Man for my portfolio of UK shares today.
Asset management
Asset managers tend to do well in rising stock markets. With that in mind, as UK shares reach new all-time highs, I think the outlook for Rathbone Brothers (LSE: RAT) is bright.
The company is one of the UK’s most storied asset and wealth managers. Its reputation should continue to attract customers. Moreover, management has been complementing organic growth with acquisitions. I think these twin tailwinds should help the business go from strength to strength.
The primary risk facing the business is the same as I’ve outlined for Man. A lousy year of trading could hurt management fee income. Also, if the group suffers reputational damage, customers could quickly move elsewhere.
Even after taking these risks into account, I’d buy the stock for my portfolio of UK shares.
